Make the most of your tax refund.

Your tax refund is here, and suddenly you’re envisioning all the items that you can buy. Although small luxuries are a healthy part of any financial plan, when it comes to funding infusions like tax returns, holiday bonuses, or unexpected windfalls, saving at least some of that money is important. And when you do, make the most out of those funds by thinking about your financial goals.

Here are the top five ways to make your tax refund or bonus stretch toward the future:

1. Build an emergency fund

Although you might have a sizeable tax refund check in your hand right now, what would happen if you ran into a huge repair bill for your house or car a few months from now? Or what if there was a medical issue that took a large portion of your savings? Creating an emergency fund helps to deal with moments like these.

Strive to build an emergency fund equal to two or three months of expenses. If you don’t have enough money to fully build an emergency fund, use what you can to get the account going in the right direction.

2. Pay off credit card debt

Every month that credit card debt lingers, it involves interest paid to lenders. Paying this debt off as quickly as possible means you’ll be saving money – often, quite a bit – in the long run. Plus, as you eliminate debt, your credit rating may improve.

3. Increase your retirement savings

How much you save for retirement is based on what you want to do when you retire, and at what age you anticipate retiring. Even if you’re just starting out in your professional life, consider putting some extra funds toward that nest egg.

The more you accumulate now, the longer that money has to earn dividends.

4. Start a holiday or vacation fund

Though not necessarily “unexpected” expenses, December holidays and vacations tend to require a chunk of funding. To prevent draining your savings account when they occur (or, worse yet, funding them with credit cards), consider using your tax refund to set up a special account that has a specific date for withdrawal.

These special accounts usually offer higher dividends, making your money work harder and go farther.

5. Save with a certificate

When you deposit money into a certificate, it locks in your money for a certain timeframe so you’re not tempted to withdraw the funds. You earn dividends on the money, and when the certificate terms end, you can access those funds to meet your next set of financial goals.

Make your money work for you

When deciding what to do it your tax refund, take some time to think through your financial goals and figure out how your money can best work for you. Consider your new funding as a boost toward meeting those goals. You worked hard to earn that refund, so make that refund work just as hard for you.

How will you put your windfall to good use? Share your story in the comments.

Pay it forward

Consider making a charitable contribution with some of your windfall. Not only will this feel great, but you may also be able to deduct your contribution from your taxes when you file next year.

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